Cash is King
Jamie Dimon, the CEO of JPMorgan, says his company is sitting on $500 billion in cash — enough cash to fill 228 Olympic-sized swimming pools!
During a conference on Monday, Dimon said JPMorgan has been stockpiling cash rather than utilizing it to purchase assets because of the possibility that increased inflation could cause the Federal Reserve to raise interest rates. He stated, “If you look at our balance sheet, we have $500 billion in cash, we’ve actually been effectively stockpiling more and more cash waiting for opportunities to invest at higher rates.”
Dimon weighed in on the current discussion about if increased inflation is due to transitory components of the reopening, such as shortages of raw materials or supply chain problems, or whether the inflation is more long-term. The latest inflation surge has been dubbed “transitory” by Fed officials, meaning short-lived. Dimon said he believes there’s a good chance inflation will be more than transitory, and he is positioning JPMorgan to benefit from rising interest rates.
A growing number of prominent voices in finance have begun to warn of dire consequences if the Fed continues to overlook inflation. Last Monday, Deutsche Bank issued a global ‘time bomb’ warning due to the rising inflation. And Monday after Dimon’s announcement, Morgan Stanley CEO James Gorman said that he also believes rising inflation could be permanent and that the Fed might be forced to raise rates sooner than expected.
Wall Street and the Fed aren’t seeing eye-to-eye on arguably the most dangerous threat to our global economy. Will we see transitory inflation, or should we get ready for rising interest rates and start stockpiling cash?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
